More than 40 years ago, George Romney, instituted the practice of releasing tax returns in his bid for the Republic Party nominations. Since then, we have not seen any tax scandals involving nominees or presidents except for Richard Nixon’s abuse of the tax code. Ironically, Mitt Romney (George’s son) is refusing to release his tax returns beyond 2010. When running for President, transparency is a vital characteristic in a respectable candidate. However, Mitt Romney is adamantly against showing his returns beyond 2010. What is he hiding?
Mitt Romney’s extensive business experience has become more of a liability than an asset. Obama’s campaign has been disclosing some controversial practices done by Bain Capital (Romney’s old company) such as using offshore accounts in the Cayman Islands. This may sound like an attack ad against Romney (which it is), however, Republican colleagues have been urging Romney to release his returns as well.
“The costs of not releasing the returns are clear, therefore he must have calculated that there are higher costs in releasing them” said George Will, long-time conservative commentator and Washington Post Columnist.
Romney’s wealth is no secret, however, that does not justify his reluctance to release prior year returns. His 2010 tax return raised some red flags when it revealed his Swiss Bank Account and immense IRA. The Swiss Bank Account for a Presidential candidate is contentious because Romney is essentially speculating the U.S. dollar will lose value in time. The account was closed in early 2010, however, a question to ask is whether the account was reported in his taxes?
His IRA is an astounding $100 million which is odd because his annual contributions were restricted at Bain to $30,000. According to Edward Kleinbard of CNN, an explanation for his high IRA “is that Romney stuffed far more into his retirement plans each year than the maximum allowed by law by claiming that the stock of the Bain company deals that the retirement plan acquired had only a nominal value. He presumably would have done so by relying on a special IRS “safe harbor” rule relating to the taxation of a service partner’s receipt of such interests, but that rule emphatically does not apply to an interest when sold to a retirement plan, which is supposed to be measured by its true fair market value.”
Perhaps the most identifiable characteristic of his previous returns is his remarkably low tax rates. In 2010 the Romneys paid a 13.9% federal tax rate on their AGI of $22 million. This gave them a lower federal tax burden than an American family earning $40,000 to $50,000 annually. He is getting such a low rate because much of his income is in carried interest which is compensation for managing other people’s money.
Mitt Romney not showing his previous income tax returns says a lot more than if he just showed them in the first place. To be in the highest position in the country, a candidate should show full transparency and compliance with the people who would elect him. Until he changes his mind, we will only see speculation into what his tax returns are hiding.
JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.
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